Elsevier

Health Policy

Volume 91, Issue 3, August 2009, Pages 239-245
Health Policy

Searching for cost effectiveness thresholds in the NHS

https://doi.org/10.1016/j.healthpol.2008.12.010Get rights and content

Abstract

Objectives

The UK's National Institute of Health and Clinical Excellence (NICE) has an explicit cost-effectiveness threshold for deciding whether or not services are to be provided in the National Health Service (NHS), but there is currently little evidence to support the level at which it is set. This study examines whether it is possible to obtain such evidence by examining decision making elsewhere in the NHS. Its objectives are to set out a conceptual model linking NICE decision making based on explicit thresholds with the thresholds implicit in local decision making and to gauge the feasibility of (a) identifying those implicit local cost effectiveness thresholds and (b) using these to gauge the appropriateness of NICE's explicit threshold.

Methods

Structured interviews with senior staff, together with financial and public health information, from six NHS purchasers and 18 providers. A list of health care services introduced or discontinued in 2006/7 was constructed. Those that were in principle amenable to estimation of a cost-effectiveness ratio were examined.

Results

It was feasible to identify decisions and to estimate the cost-effectiveness of some. These were not necessarily ‘marginal’ services. Issues include: services that are dominated (or dominate); decisions about how, rather than what, services should be delivered; the lack of local cost effectiveness evidence; and considerations other than cost-effectiveness.

Conclusions

A definitive finding about the consistency or otherwise of NICE and NHS cost effectiveness thresholds would require very many decisions to be observed, combined with a detailed understanding of the local decision making processes.

Introduction

Since its inception in 1999, the UK's National Institute for Health and Clinical Excellence (NICE) has provided evidence-based guidance for the NHS in England and Wales on the clinical and cost effectiveness of new and existing interventions. NICE is only one of many organisations that influence the use of resources in the NHS. Spending is influenced by policy decisions made by the Department of Health – for example, to reduced waiting time targets. Other decisions about which services are provided, when, how and to whom, are made inter alia by Primary Care Trusts (PCTs), health care provider organisations such as Hospital Trusts and individual health professionals. Treatments recommended by NICE account for a very small proportion of NHS spending. Nevertheless, NICE decisions have an effect on resource use and it is important that those decisions use not only good information, but also good decision making criteria.

One accepted decision-making criterion in the NHS is the cost-effectiveness of the services that it provides. Whilst most NHS decisions do not require explicit estimation of cost effectiveness, NICE is charged with a responsibility to be both explicit and transparent. It therefore has to state what is and what is not cost-effective. NICE's stated ‘threshold’ is based on the incremental cost-effectiveness ratio (ICER), expressed as an incremental cost per Quality Adjusted Life Year (QALY) gained.

However, the ICER level that NICE has adopted as the criterion for its decisions – a ‘range’ of £20,000 to £30,000 per QALY gained – has no firm basis in evidence or theory. It is based on a broad assertion that emerged from informal judgements made by NICE advisory committees. Cost effectiveness is not the sole driver of NICE decisions [1], [2], [3], [4], [5], but is an important consideration; so a defensible basis for judgements about what is acceptable value for money is important for NICE, the NHS, taxpayers and patients.

In a commentary on NICE [6], Alan Williams noted that a cost-effectiveness threshold can be established in two ways. We can either decide how much a QALY is worth, by finding its value to society or find the value of a QALY implied by budget-constrained decisions made in the NHS. These will coincide only under special circumstances that in practice are not met: the NHS budget is set to enable all health care to be provided whose marginal benefits, in terms of QALYs gained, are greater than or equal to their marginal costs; all budgets and their allocation are driven by QALY maximisation; and information on the costs and benefits of all possible health care is readily available. So, if NICE based its decisions on the social value of a QALY, they might be inconsistent with the budget constraints faced in practice by NHS organisations such as PCTs.1

NICE does not in fact use the social value approach. NICE's threshold is intended to reflect what is affordable given finite NHS resources and the demand on these resources from available health care services, management practices and population needs [7]. But if NICE adopts any threshold that is inconsistent with the threshold implied by PCT budgets, the same problem will arise: patients will be denied cost-effective services. If NICE's threshold is above that relevant to PCT budgets, implementation of NICE decisions will ‘crowd out’ more cost-effective services locally; if it is below, NICE will reject health care technologies that are cost-effective relative to others provided locally.
Williams noted that

“…it is extremely likely that the ‘shadow price’ of a QALY (i.e. the implicit value of a QALY as determined by the most cost effective intervention that each purchaser just cannot afford to buy) will vary from purchaser to purchaser. And it is widely believed that this ‘shadow price’ is much lower than the NICE benchmark of £30k. I think a major effort should be made to find out whether this belief is well founded.” (p. 8) [6]

The study reported here assessed the feasibility of locating the implicit value of a QALY in the NHS by examining local NHS decisions. Specific objectives were to investigate the feasibility of identifying services that reveal the threshold implied by local NHS decisions, estimating ICERs for those services and generating conclusions about the congruence of local and NICE judgements about value for money. Our focus was on services amenable to change, whether being introduced or being discontinued.

While this study is empirical, a conceptual framework is required to define a threshold concept that can be applied to decision making by both PCTs and NICE. This has the obvious difficulty that PCTs’ thresholds are implicit, and NICE denies that it has a single threshold.

Section snippets

What is NICE's threshold?

NICE has always avoided the term ‘threshold’, instead expressing its cost-effectiveness criteria in terms of a “range of acceptable incremental cost-effectiveness ratios”:

“There is no empirical basis for assigning a particular value (or values) to the cut-off between cost effectiveness and cost ineffectiveness. The consensus amongst the Institute's economic advisors is that the Institute should, generally, accept as cost effective those interventions with an incremental cost-effectiveness ratio

Methods

Eight PCTs were identified as potential study sites. One declined to participate and one did not reply. The six PCTs in the study were not intended to be representative, geographically or in any other respect. Rather, they were either accessible to the research team through professional networks or whose decision making was known to be led by individuals who would be interested in the study.

Structured interviews with the Directors of Public Health in each PCT were carried out between January

Identification of services amenable to change

Completed questionnaires were returned by 17 Finance Directors, indicating specific services they had introduced or discontinued during the current financial year and the rationale for these decisions.

Most decisions were not relevant for our analysis. In almost every case, the reasons why providers discontinued services were that their unit cost exceeded the NHS tariff price or their local PCT had decided to commission the service elsewhere, or both. Similarly, most new services were related to

Discussion

The concept of an implied cost-effectiveness threshold does not require PCT decision makers to have made a detailed analysis of the costs and benefits arising from decisions about what is to be included in and excluded from the package of commissioned services. It does however require that PCTs have made such decisions, and that these are not made randomly but are informed by costs and benefits. Our study suggests that they do make such decisions and these are quite easily identified. PCTs

Acknowledgements

This project was funded by NICE R&D, within Framework Agreement 01/06/2004 between HAD and King's Fund.

We are grateful to members of our project steering group for valuable advice and feedback: Tony Culyer, Peter Littlejohns, Alastair Fischer, Jo Lord and Jennifer Field (from NICE); Donald Franklin and Andrew Jackson (Department of Health); and Karl Claxton (University of York).

We wish to express our gratitude to NHS staff who participated in this study, including the NHS Finance Directors who

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